Aipedia: Accountants

Telling clients you use AI: engagement letters

Aipedia, by the Apex broking team · Last reviewed 2026-10-27

Accountants should tell clients in the engagement letter that AI tools may be used, as the PCRT AI guidance (para 1.3) recommends. Clear terms on AI and client data also help defend a claim if work is later challenged.

Part of: AI in Accountants

In short

The PCRT AI guidance of January 2026 asks members to include a statement about possible AI use in the engagement letter (para 1.3) and to be transparent with clients (para 1.2). The CCAB draft Statement of June 2026 also says to tell clients how AI is used and to consider saying so in the engagement letter, and asks for specific consent before client data goes into AI tools. Neither creates a new binding rule, but they show what the profession expects. A clear AI clause, combined with consent records and limits on reliance, can strengthen a firm's position if a client later complains.

What the guidance says

The PCRT Topical Guidance on the Use of Artificial Intelligence, issued on 19 January 2026 by AAT, ACCA, ATT, CIOT, ICAEW, ICAS and STEP, covers any accountant doing UK tax work. It asks for:

transparency with clients about AI use (para 1.2);
a statement in the engagement letter about possible use of AI (para 1.3);
care with confidentiality: client data in public AI tools "is likely to constitute a breach of client confidentiality" without consent (para 4.2), with anonymisation where possible (4.4).

The CCAB draft Statement (exposure draft dated 6 June 2026, not final) says to tell clients how AI is used and to consider saying so in the engagement letter, and that client data should not go into AI tools without specific consent, especially tools that keep data for training. ICAEW's 2024 roundtable report also recommends openness with clients. See our guidance explainer for the status of each document.

What an AI clause usually covers

That the firm may use AI tools to assist with its work, and that qualified staff review the output.
That the firm remains responsible for the work it delivers.
Which kinds of tools are used, for example enterprise tools within the firm's own systems, and that client data is not put into public tools without consent.
Where data is stored and whether providers retain it.
How the client can ask questions or object.
Any specific uses that need separate agreement, such as recording meetings.

The clause should match what the firm actually does. A statement that "AI is never used with client data" is risky if staff use drafting assistants every day.

Consent and clients who refuse

Some clients will ask the firm not to use AI on their work, or not to use it with their data. The firm then has to decide whether it can deliver the service without those tools, whether that affects fees or timetables, and how it will make sure staff follow the restriction. Recording the client's choice on the file, and flagging it in the practice management system, helps prevent accidental breaches.

Consent should be specific enough to mean something. A broad clause buried in standard terms may not be enough for uses such as recording meetings or uploading full records to a third-party tool, where the CCAB draft points towards specific consent.

How clear terms help defend claims

If a client later says it did not know AI was used, or that the firm took on a wider role than agreed, the engagement letter is the first document a defence lawyer or insurer will read. Clear scope, a statement of the limits of the work (which the Code requires under R113.3), restrictions on third-party reliance and any liability cap all help. A clause cannot excuse negligence, and caps must be reasonable to be enforceable, but terms that match practice reduce arguments. See engagement letters and liability caps and what to document about AI use.

Practical steps

Map how AI is used across the firm before drafting the clause.
Add the clause at the next renewal of each engagement letter, not only for new clients.
Get separate consent for AI notetakers and for client-facing tools such as chatbots.
Keep the clause under review as the CCAB Statement is finalised.
Tell your broker how AI is used; see whether PI covers AI mistakes.

How Apex helps

Apex arranges PI for accountants, and a broker can explain how your engagement terms and AI use fit with your policy. See the accountancy AI overview.

Sources

Frequently asked

Do accountants have to mention AI in engagement letters?

There is no binding rule, but the PCRT AI guidance (para 1.3) asks members doing UK tax work to include a statement about possible AI use, and the CCAB draft Statement suggests the same. It is becoming the expected standard.

Is a clause in the engagement letter enough consent to put client data into AI tools?

Often not for higher-risk uses. The PCRT guidance says public tools are likely to breach confidentiality without consent, and the CCAB draft asks for specific consent. Use enterprise tools and get separate consent for uses such as meeting recording.

What if a client refuses to let us use AI?

Record the instruction, flag it on the client file and make sure staff follow it. Decide whether the service can be delivered without AI and whether fees or timing need to change, and confirm this in writing.

Can an AI clause limit our liability for AI errors?

Not on its own. The firm remains responsible for its work and cannot use a clause to avoid accountability. A reasonable liability cap and clear scope can limit exposure, but they apply to the engagement as a whole.

Check your PI covers how you use AI

Tell us about your firm and the work you do. A broker will review how your current PI treats AI-assisted work, or arrange new cover. No fee for a quote. Or call 0117 325 0027.

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Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information about how AI is used in the profession and how insurance may respond. It is not legal, regulatory or insurance advice on your circumstances, and it does not guarantee that cover will be available or on what terms.